Competitiveness, Strategy and Productivity

1. Reporter: Robert V. Espiritu Competitiveness, Strategy and Productivity

2. Companies must be competitive to sell their goods in the marketplace. Competitiveness is an important factor in determining whether a company prospers, barely gets by, or fails. Competitiveness: How effectively an organization meets the wants and needs of consumers relative to others that offer similar goods or services CoMPetitiveness

3. Business organizations compete through some combination of marketing and operational functions. • Marketing influences competition in several ways: • Identifying consumer wants and/or needs. • Pricing • Advertising and promotion CoMPetitiveness

4. Operations influences competition is several ways: • Product and service design • Cost • Location • Quality • Quick response • Flexibility • Inventory management • Supply chain management • Service CoMPetitiveness

5. Product and service design should reflect joint efforts of many areas of the firm to achieve a match between financial resources, operations capabilities, supply chain capabilities, and consumer needs and wants. CoMPetitiveness

6. Cost is a key variable that affects pricing decisions and profits. Productivity is an important determinant of cost. Organizations with higher productivity rates than their competitors have a competitive cost advantage. Outsourcing may help achieve lower costs, higher productivity or better quality. CoMPetitiveness

7. Location can be important in terms of cost and convenience for customers. Locations near inputs result in lower input costs. Locations near markets can result in lower transportation costs and quicker delivery times. CoMPetitiveness

8. Quality refers to materials, workmanship, design and service. Consumers judge quality of how well they think a product or service will satisfy its intended purpose. CoMPetitiveness

9. Quick response can be a source of competitive advantage by quickly bringing new or improved products or services to the market or delivering existing products or services to the customer after they are ordered. CoMPetitiveness

10. Flexibility is the ability to respond to changes. Changes might relate to alteration in design features of a product or a service or to the volume demanded by customers or the mix of products or services offered by an organization. CoMPetitiveness

11. Inventory management can be a competitive advantage by effectively matching supplies of goods with demand. CoMPetitiveness

12. Supply chain management involves coordinating internal and external operations (buyers and suppliers) to achieve timely and cost-effective delivery of goods throughout the system. CoMPetitiveness

13. Service might involve after-sales activities that customers may perceive as value added such as delivery, setup, warranty and technical support. CoMPetitiveness

14. Strategies are plans for achieving organizational goals. They can be long term, intermediate term or short term. To be effective, strategies must be designed to support the organization’s mission and its organizational goals. STRATEGY

15. Mission and Goals • An organization’s mission is the reason for its existence. It is expressed in its mission statement, which states the purpose of an organization and answers the question “What business are we in?” • A mission statement serves as the basis for organizational goals, which provide more detail and describe the scope of the mission. • Goals in turn provide the basis for strategies and tactics. • Tactics are methods and actions taken to accomplish strategies STRATEGY

16. STRATEGY Mission Goals OrganizationalStrategies Functional Goals Finance Strategies MarketingStrategies OperationsStrategies Tactics Tactics Tactics Operatingprocedures Operatingprocedures Operatingprocedures

17. Rita is a high school student. She would like to have a career in business, have a good job, and earn enough income to live comfortably. STRATEGY

18. Mission: Live a good life • Goal: • Successful career, good income • Strategy: • Obtain a college education • Tactics: • Select a college and a major, decide how to finance college • Operations: • Register, buy books, take courses, study, graduate, get job STRATEGY

19. Some strategies an organization may pursue: • Low Cost: Outsource operations to countries with low labor cost • Scale-based: Use capital intensive methods to achieve high output volume and low unit costs. • Specialization: Focus on narrow product lines or limited service to achieve higher quality. • Flexible operations: Focus on quick response and/or customization. • High quality: Focus on achieving higher quality than competitors. • Service: Focus on various aspects of service STRATEGY

20. Generally strategies take into account the way organizations compete and a particular organization’s assessment of its own strengths and weaknesses in order to take advantage of its distinctive competencies. Distinctive Competencies are the special attributes or abilities that give an organization a competitive edge. STRATEGY

21. Operations strategy – The approach, consistent with organization strategy, that is used to guide the operations function. STRATEGY

22. Price Low Cost U.S. first-class postage Motel-6, Red Roof Inns Quality High-performance design or high quality Consistent quality Sony TV Lexus, Cadillac Pepsi, Kodak, Motorola Time Express Mail, Fedex, One-hour photo, UPS Rapid deliveryOn-time delivery Flexibility Variety Volume Burger King Supermarkets Service Superior customer service Disneyland Nordstroms Location Convenience Banks, ATMs Examples of Distinctive Competencies FACTOR Operations Strategy

23. Strategy formulation must take into account the distinctive competencies of the organization and a scan of the environment. In formulating a successful strategy organizations must take into account order qualifiers and order winners. strategy

24. Order qualifiers • Characteristics that customers perceive as minimum standards of acceptability to be considered as a potential for purchase. • Order winners • Characteristics of an organization’s goods or services that cause it to be perceived as better than the competition. strategy

25. Environmental scanning is the considering of events and trends that present either threats or opportunities for the organization. This is known as external environmental scanning. Internal factors that relate to strengths and weaknesses are part of the internal environment. strategy

26. Key External Factors • Economic • Political • Legal • Technology • Competition • Markets strategy

27. Other factors can be classified under: • PEST analysis (Political, Economic, Social, and Technological analysis) • STEER analysis involving Socio-cultural, Technological, Economic, Ecological, and Regulatory factors • EPISTEL (Environment, Political, Informatic, Social, Technological, Economic and Legal) • STEEPDG (Socio-cultural, Technological, Economic, Environmental, Politico-Legal, Demographic, Global) STRATEGY

28. Key Internal Factors • Human Resources • Facilities and equipment • Financial resources • Customers • Products and services • Technology • Suppliers strategy

29. The approach, consistent with the organization’s strategy, that is used to guide the operations functions. Relates to products, processes, methods, operating resources, quality, costs, lead times, and scheduling. Operations strategy

30. Operations Strategy ORGANIZATION OPERATIONS

31. Two factors that tend to have universal strategic operations importance relate to quality and time. Quality-based strategies focus on maintaining or improving quality in all phases of an organization. Time-based strategies focus on reducing the time required to accomplish tasks. OPERATIONS STRATEGY

32. Organizations have achieved time reduction in some of the following: • Planning time • Product/service design time • Processing time • Changeover time • Delivery time • Response time for complaints OPERATIONS STRATEGY

33. Planning time: the time needed to react to a competitive threat, to develop strategies and select tactics, to approve proposed changes to facilities, to adopt new technologies, and so on. • Product / service design time: the time needed to develop and market new or redesigned products or services. OPERATIONS STRATEGY

34. Processing time: time needed to produce goods or provide services. This can involve scheduling, repairing equipment, methods used, inventories, quality, training and the like. • Changeover time: The time needed to change from producing one type of product or service to another. This may involve new equipment settings and attachments, different methods, schedules and materials. OPERATIONS STRATEGY

35. Delivery time: time needed to fill orders. Response time for complaints: these might be customer complaints about quality, timing of deliveries, and incorrect shipments. These might also be complaints from employees about working conditions, equipment problems or quality problems. OPERATIONS STRATEGY

36. Outputs Productiv ity = Inputs • Reducing the time needed to perform work is one of the ways an organization can improve a key measure: productivity • Productivity is a measure of the effective use of resources, usually expressed as the ratio of output to input. productivity

37. A productivity ratio can be computed for a single person, a department, an organization or an entire country. Productivity growth is the increase in productivity from one period to the next relative to the productivity in the preceeding period. productivity

38. Productivity growth: So for example, if productivity increased from 80 to 84 then the growth rate would be: 84 – 80 80 productivity Current Period Productivity – Previous Period Productivity Previous Period Productivity x 100 = 5%

39. Computing productivity can be based on a single input (partial productivity), on more than one input (multifactor productivity), or on all inputs (total productivity). The choice of measure depends primarily on the purpose of measurement. productivity

40. Types of Productivity measures Partial Output Output Output Outputmeasures Labor Machine Capital Energy Multifactor Output Output measures Labor + Machine Labor + Capital + Energy Total Goods or Services Produced measure All inputs used to produce them

41. Labor Productivity Units of output per labor hour Units of output per shift Value-added per labor hour Machine Productivity Units of output per machine hour machine hour Capital Productivity Units of output per dollar input Dollar value of output per dollar input Energy Productivity Units of output per kilowatt-hour Dollar value of output per kilowatt-hour partial productivity measures

42. 7040 Units Produced Sold for $1.10/unit Cost of labor of $1,000 Cost of materials: $520 Cost of overhead: $2000 SAMple problem What is the multifactorproductivity?

43. Sample problem solution MFP = Output Labor + Materials + Overhead MFP = (7040 units)*($1.10) $1000 + $520 + $2000 MFP =2.20 units per $1 input

44. Capital Quality Technology Management Factors that affect productivity

45. Standardization Quality differences Use of Internet Computer viruses Searching for lost or misplaced items New workers Factors that affect productivity

46. Safety Shortage of IT workers Layoffs Labor turnover Design of the workspace Incentive plans that reward productivity Factors that affect productivity

47. Develop productivity measures Determine critical (bottleneck) operations Develop methods for productivity improvements Establish reasonable goals Get management support Measure and publicize improvements Don’t confuse productivity with efficiency Improving productivity

48. Thank You!!! Source: Operations Management 9th Edition William J. Stevenson McGraw-Hill Irwin